The federal banking agencies have jointly issued the attached Notice of Proposed Rulemaking (NPR) seeking comment on whether to allow goodwill, which must be deducted from Tier 1 capital, to be reduced by the amount of any associated deferred tax liability. The FDIC will accept comments on the NPR through October 30, 2008.

Highlights:

Under the agencies' existing regulatory capital rules, certain assets that must be deducted from Tier 1 capital may be reduced by any deferred tax liability specifically related to the asset.

In the attached NPR, the agencies propose to extend this treatment to goodwill acquired in a taxable business combination, thereby allowing a bank, bank holding company, or savings association to make the required deduction of goodwill from Tier 1 capital net of any associated deferred tax liability.

The NPR also requests comment on whether there are other intangible assets currently required to be fully deducted from Tier 1 capital for which the agencies should consider a similar treatment.